More families feel the pinch as diaspora inflows shrink

Shrinking diaspora remittances put pressure on Kenyan households. [File, Standard]

Hundreds of thousands of Kenyan households that depend on the money sent home from relatives abroad are facing a deepening financial crisis after diaspora remittances fell for a second consecutive month in May.

The dip is attributed to job losses in the Gulf and rising living costs for migrants caught in the ongoing Middle East conflict in countries including the United States. 

Money sent to Kenya from its citizens overseas totalled $394.2 million (Sh51 billion) in May, down 0.9 per cent from $397.8 million (Sh51.6 billion) in April, according to data from the Central Bank of Kenya (CBK) released on Friday.

The 12-month cumulative inflows to May 2026 decreased by 0.5 per cent to $5,008 million (Sh651 billion) from $5,033 million (Sh654.29 billion) in the same period in 2025. The decline was driven by weaker inflows from key source markets, including Gulf Arab States, where the Iran-Israel war has upended employment, as well as the United States, where surging inflation is eroding the disposable income of Kenyan expatriates.

For millions of Kenyans living hand-to-mouth, the drop could not come at a worse time. Kenya’s annual inflation accelerated to 6.7 per cent in May 2026, up sharply from 5.6 per cent in April, marking the third consecutive monthly increase and the highest level since January 2024.

The Consumer Price Index rose from 152.15 in April to 154.56 in May, translating to a monthly inflation rate of 1.6 per cent.

The strain on Kenyan expatriates in the US – Kenya’s largest single source of remittances – has been compounded by a sharp acceleration in US inflation. 

Annual inflation in America reached 4.2 per cent in May, its highest level in three years, largely driven by the fallout from the US conflict with Iran. The blockade of the Strait of Hormuz has choked global oil supplies, sending fuel prices surging and driving up the broader cost of food, airfare, and shipping. Energy costs have jumped significantly in America, with the national average (petrol) gasoline price climbing to $4.50 (Sh585) per gallon – the highest level since the summer of 2022. 

The supply chain disruptions are echoing pandemic-era logjams, with groceries rising to their highest rates since 2023, while items like airfare and auto insurance have also seen major price hikes.

For the first time in three years, the cost of living in the US has outpaced wage growth, effectively reducing the purchasing power of the average American worker – including the thousands of Kenyans working in the US who now have less to send home. Over 400,000 Kenyans work in Gulf countries, chiefly Saudi Arabia, the United Arab Emirates and Qatar.

Remittances from Saudi Arabia crashed 25 per cent in 2025 even before the war began, and the outbreak of hostilities has since triggered layoffs in construction, hospitality and domestic service, Kenyan recruitment agents say.

The World Bank has estimated that the conflict could push inflation up by four percentage points or more, shaving 2.6 per cent from household incomes.

There are tentative signs of relief on the horizon. The United States and Iran are conducting talks, raising hopes of a return to normalcy on global trade.

The CBK noted that “inflation pressures eased” following the preliminary ceasefire deal, and global oil prices have already started to retreat. However, the damage to household budgets has already been done.

Despite the headwinds, the Kenyan economy showed some resilience in the week ending June 18. The Kenyan shilling remained stable, exchanging at Sh129.55 per US dollar. Foreign exchange reserves remained adequate at $13.15 billion (Sh1.7 trillion), representing 5.6 months of import cover, well above the CBK’s statutory requirement of at least four months.

The money market remained liquid, with commercial banks’ excess reserves averaging Sh28 billion above the 3.25 per cent Cash Reserve Ratio requirement. The Kenya Shilling Overnight Interbank Average Rate remained unchanged at 8.75 per cent.

At the Nairobi Securities Exchange, the NASI, NSE 25 and NSE 20 share price indices increased by 2.57 per cent, 3.68 per cent and 1.90 per cent, respectively.

In the international market, yields on Kenya’s Eurobonds decreased by 51.38 basis points on average, reflecting improved investor sentiment following the ceasefire deal.

 For now, Kenyan families are left to stretch ever-shrinking resources. “We are suffering. Everything is expensive now – from food, transport, even cooking gas,” Jane Wanjiku, a 42-year-old food vendor in Naivasha, told The Standard earlier.

“My business earnings cannot keep up. Last year, I could save a little. Now I just pray nothing else goes up.” The price increases were driven primarily by three categories that together account for over 57 per cent of household spending.

Food and non-alcoholic beverages rose 9.4 per cent year-on-year, while transport surged 16.5 per cent. Housing, water, electricity, gas and other fuels increased 3.4 per cent.

Within the food basket, vegetables such as cabbage and spinach rose by five per cent between April and May alone.

A kilo of tomatoes now costs Sh108.60, up 32.6 per cent from a year ago, while potatoes have risen 17.4 per cent and beef with bones climbed 11.1 per cent to Sh749.65. A 13-kg cooking gas cylinder sells for Sh3,362, up 6.5 per cent year-on-year.

Fuel costs have been a major driver. Diesel prices rose 18 per cent and petrol 8.4 per cent in May, pushing tuktuk fares up 12 per cent. Kerosene prices jumped 25.3 per cent. The CBK noted that “inflation concerns remained elevated” due to high global energy prices from the “ongoing US-Israel-Iran war”.

International oil prices surged, with Murban crude reaching $94.84 (Sh12,000) per barrel on May 14 before retreating to $74.41 (Sh9,620) following the preliminary ceasefire deal.

Despite inflation breaching the CBK’s preferred midpoint of five per cent and approaching the upper end of its 2.5–7.5 per cent target band, the Monetary Policy Committee held the Central Bank Rate at 8.75 per cent in June for a second consecutive meeting.

Policymakers argued the inflation was “imported” – driven by global oil prices rather than domestic demand – and that existing settings remain sufficient to anchor expectations.

The CBK revised down Kenya’s 2026 GDP growth forecast to 4.9 per cent from 5.3 per cent, citing the Middle East conflict and evolving global trade dynamics.